The impact of international cross-listings on firm value after the Sarbanes–Oxley Act: Evidence from American depositary receipts

Cao, Man Minh
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Southern New Hampshire University
The Sarbanes-Oxley Act is formally named the Public Company Accounting Reform and Investor Protection Act of 2002. The act is arguably one of the most significant reforms to affect the U.S. stock markets since the Securities Exchange Act of 1934. This study compares valuation implications of ADR announcements before and after the introduction of the act. A total of 234 ADR announcements are analyzed over a time frame spanning from 1994 to 2010 by employing event study methodology. Even though several studies attempt to explore the effects of the act on the value of firms issuing American Depository Receipts (ADR), reported results are either negative or positive. The empirical results presented in this study indicate that the impact on ADR issuing firms is not negative. The observed cumulative abnormal returns (CARs) reveal that investors on average positively react to ADR issue announcements during the post Sarbanes-Oxley period. However, empirical results do not lend support for the hypothesis that CARs are significantly different during the two periods analyzed in the study.